Section 172(b)(2), in pertinent part, provides: (2) AMOUNT OF CARRYBACKS AND CARRYOVERS.-The entire amount of the net operating loss for any taxable year *** shall be carried to the earliest of the taxable years to which *** such loss may be carried. The portion of such loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried. Section 1.172-1(b), Income Tax Regs., also describes the steps to be taken to ascertain an NOL deduction for a given taxable year. It describes NOL carryovers from "preceding taxable years" and NOL carrybacks from such "succeeding taxable years”. An NOL deduction from any given year maintains its character of arising in that year when carried back or carried forward. See sec. 1.172-6, Income Tax Regs. In addition, section 1.172-4(a)(3), Income Tax Regs., provides: The amount which is carried back or carried over to any taxable year is the net operating loss to the extent it was not absorbed in the computation of the taxable (or net) income for other taxable years, preceding such taxable year, to which it may be carried back or carried over. Section 172, therefore, requires that the losses be carried back and forward in a certain order and places outer limits on the years to which the losses may be applied. The regimen of section 172 also provides that the year from which the loss emanates does not change. Therefore, losses acquired by the estate or acquired or reacquired by the debtor would be time limited according to the source year of the loss. Accordingly, sections 1398 and 172 do not circumscribe petitioner's ability to carry forward prepetition NOLS that he succeeded to from the bankruptcy estate. This view is supported in the following dicta: Any remaining NOL belonging to the estate will be returned to the debtortaxpayer after the discharge in bankruptcy and termination of the estate. Sec. 1398(i). The debtor is then free to use the NOL as a carryforward, section 1398(i), or carryback, as long as the NOL arose before the commencement of the bankruptcy case, section 1398(j)(2)(B). [Kahle v. Commissioner, T.C. Memo. 1997-91.] See also McGuirl v. Commissioner, T.C. Memo. 1999-21. Petitioner argues that he succeeded to NOLS that were incurred by the operation of the bankruptcy estate and that section 1398(j)(2)(B) limits only his ability to carry back such NOLS to his taxable years that preceded the commencement of his bankruptcy case. Thus, he argues, he may use the NOLS in postcommencement tax years. We agree with petitioner that the losses succeeded to from the estate may be used, to the extent permitted in section 172, in the debtor's taxable years beginning with the year in which the bankruptcy commenced. Some commentators have drawn an analogy between section 1398(g) and (i), and section 642(h), which governs the availability of a trust's or estate's unused loss carryovers to the beneficiaries. In section 642(h) it is clear that a beneficiary may only carry forward the trust's or estate's unused loss carryovers beginning with the year the trust or estate terminates. The analogy was likely drawn because of the acquisition of a trust's or estate's tax losses upon the termination of the trust or estate. The analogy diminishes in significance, however, because of an important distinction between the section 642(h) situation and the section 1398 situation we consider in this case. In the section 642 setting, the estate or trust and the beneficiary are wholly separate taxpayers, and a carryback to years before the commencement of the estate or trust would not be a logical extension of the succession concept in that setting. Conversely, a bankruptcy estate subsists as a parallel portion of the same taxpayer, the debtor. The bankruptcy estate is allowed to use the debtor's precommencement losses to offset any portion of the estate's income during the bankruptcy proceeding. Upon the termination of the bankruptcy estate, the losses of the bankruptcy estate received by the debtor may, in part, include the debtor's precommencement losses. Those differences make inappropriate any attempt to draw an analogy between section 1398(g) and (i), and section 642(h).18 The parties have not provided any precedent or in-depth and consequential deliberation concerning the question we consider. Although a few cases have peripherally focused on this question, no analysis or legislative history exists from which guidance may prudently be sought. Respondent referenced a few commentators' prognoses of how losses from a 18 As previously explained, sec. 1398 contemplates the use of the debtor's tax attributes by the bankruptcy estate and their return to the debtor upon the termination of the estate. This same reasoning distinguishes the analogy to sec. 642(h). bankruptcy would be treated. Those commentaries are terse and contain no analysis, policy considerations, or precedents in support of the comments or conclusions reached.19 Accordingly, we place no reliance on these extraneous offerings. We therefore hold that petitioner is entitled to carry forward losses inherited from the bankruptcy estate and those to which the debtor was already entitled in accord with section 172 and the underlying regulations. Those losses may be applied, in accord with the provisions of section 172, for the year of the commencement of the bankruptcy and later years. V. CBM and Bankruptcy Estate Payments to Petitioner Petitioner argues that the more than $2 million in payments received from CBM were dividends or profits to the Benton estate on account of its ownership of shares in CBM. Petitioner further asserts that the payments from CBM and a $25,000 payment he received from the Benton estate constituted loans to him from the Benton estate. Finally, petitioner contends that the loans were discharged as part of the plan and nontaxable to him pursuant to section 108(a)(1)(A). Respondent argues that petitioner received the payments from CBM and the Benton estate as compensation under a claim of right without restriction as to disposition. Upon a careful review of the record and analyzing factual inferences in a manner most favorable to the party opposing summary judgment, we conclude that genuine issues of material fact exist relating to this issue. See Dahlstrom v. Commissioner, 85 T.C. at 821. Accordingly, summary judgment is inappropriate with respect to this issue. An appropriate order will be issued. 19 McQueen & Williams, Tax Aspects of Bankruptcy Law and Practice, sec. 18-23 (2d ed. 1995); Newton & Bloom, Bankruptcy and Insolvency Taxation, sec. 2.16 (John Wiley & Sons, 1991); Tatlock, Discharge of Indebtedness, Bankruptcy, and Insolvency, 540-2d Tax Mgmt. (BNA), at A-37 (2003). LAUREN OSTROW AND JOSEPH TEIGER, PETITIONERS RESPONDENT Docket No. 6325-03. Filed May 21, 2004. Petitioner wife was a tenant-stockholder in a cooperative housing corporation. Tenant-stockholders may deduct their proportionate share of real estate taxes paid by a cooperative housing corporation of which they are stockholders. Sec. 216(a)(1), I.R.C. Petitioner wife's proportionate share of real estate taxes paid by the cooperative housing corporation was $10,489. Petitioners deducted $10,489 (1) from adjusted gross income for regular tax purposes and (2) in computing alternative minimum taxable income for alternative minimum tax purposes. Held, a deduction under sec. 216(a)(1), I.R.C., does not reduce alternative minimum taxable income. Ira Z. Kevelson, for petitioners. COLVIN, Judge: Respondent determined a deficiency in petitioners' 2001 Federal income tax of $3,698. Petitioner wife was a tenant-stockholder in a cooperative housing corporation. After concessions, the sole issue for decision is whether a deduction allowed under section 216(a)(1) for petitioner wife's share of the real estate taxes paid by a cooperative housing corporation reduces alternative minimum taxable income.1 We hold that it does not. Section references are to the Internal Revenue Code in effect for the year in issue. Rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT The parties submitted this case fully stipulated under Rule 122. Petitioners resided in New York, New York, when they filed their petition. Lauren Ostrow (petitioner) was a tenant-stockholder of a cooperative housing corporation in 2001. Petitioners deducted $10,489, which was petitioner's proportionate share of real estate taxes paid by the corporation, as a miscellaneous itemized deduction. In computing their alternative minimum 1 Respondent first raised this issue in the answer. See Rule 142(a)(1). We need not consider which party bears the burden of proof because the issue is one of law. tax liability, petitioners treated the $10,489 as deductible in computing their alternative minimum taxable income. OPINION A. Background Section 164 provides a deduction for real property taxes and other specified taxes paid or accrued by the taxpayer during the taxable year. Sec. 164(a)(1).2 In addition, a tenant-stockholder may deduct amounts paid by or accrued to a cooperative housing corporation within the taxable year, to the extent that the amounts represent the tenant-stockholder's proportionate share of (1) the real estate taxes deductible by the corporation under section 164, sec. 216(a)(1), and (2) the mortgage interest deductible by the corporation under section 163, sec. 216(a)(2).3 Section 55 provides for an alternative minimum tax (AMT). In computing alternative minimum taxable income (AMTI), no deduction is allowed to an individual for, inter alia, mis 2 Sec. 164(a) provides in pertinent part: SEC. 164. TAXES. (a) GENERAL RULE.-Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued: (1) State and local, and foreign, real property taxes. (2) State and local personal property taxes. (3) State and local, and foreign, income, war profits, and excess profits taxes. 3 Sec. 216 provides in pertinent part: SEC. 216. DEDUCTION OF TAXES, INTEREST, AND BUSINESS DEPRECIATION BY CO-OPERATIVE HOUSING CORPORATION TENANT-STOCKHOLDER. (a) ALLOWANCE OF DEDUCTION.-In the case of a tenant-stockholder (as defined in subsection (b)(2)), there shall be allowed as a deduction amounts (not otherwise deductible) paid or accrued to a cooperative housing corporation within the taxable year, but only to the extent that such amounts represent the tenant-stockholder's proportionate share of— (1) the real estate taxes allowable as a deduction to the corporation under section 164 which are paid or incurred by the corporation on the houses or apartment building and on the land on which such houses (or building) are situated, or (2) the interest allowable as a deduction to the corporation under section 163 which is paid or incurred by the corporation on its indebtedness contracted (A) in the acquisition, construction, alteration, rehabilitation, or maintenance of the houses or apartment buildings, or (B) in the acquisition of the land on which the houses (or apartment building) are situated. Although sec. 216 refers to taxes or interest, a tenant-stockholder may deduct his or her share of both taxes and interest paid by a cooperative housing corporation. See Eckstein v. United States, 196 Ct. Cl. 644, 452 F.2d 1036, 1038, 1047-1048 (1971); Park Place, Inc. v. Commissioner, 57 T.C. 767, 774 (1972); S. Rept. 1631, 77th Cong., 2d Sess. 51 (1942), 1942-2 C.B. 504, 546 ("The bill provides for a new deduction *** of taxes and interest paid or accrued by a tenant stockholder to a cooperative apartment corporation"); IRS Publication 530, Tax Information for First-Time Homeowners 3-4 (2003 ed.). |